Econ Formulas

Topics: Generally Accepted Accounting Principles, Revenue, Profit Pages: 2 (527 words) Published: December 6, 2012

Procter & Gamble’s Gross Profit Margin (GPM) increased in 2010 by 2.41%, however it decreased in 2011 by 1.34%, while Net Sales continued to increase from 2009 to 2011. This trend was due to a price fluctuation in Cost of Goods Sold. The GPM directly affected the Operating Profit Margin (OPM), which also increased in 2010 by 0.25% and decreased in 2011 by 1.14%. The Operating expenses were somewhat stable, which resulted in the OPM ratios following a similar trend as the GPM ratios. While Net Sales increased, the Net Profit Margin (NPM) resulted in a downward trend with Net Income decreasing in 2010 by 1.39%, and in 2011 by 1.84%. The cause of the NPM downward trend were the gains from Extraordinary Items, which were $2,756 million from a divestiture of a coffee subsidiary in November 2008 and $1,790 million from a divestiture of a pharmaceuticals subsidiary in October 2009. The NPM would have followed the same upward trend as Net Sales if these gains did not occur. The results of the Return on Assets (ROA) and Return on Equity (ROE) are both downward trends, which are also due to the gains in Extraordinary Items. If the extraordinary gains were not included in the ROA and ROE ratios, then the trends would be upward or stable, depicting proper asset investing and sufficient returns to shareholders by Procter & Gamble. The Clorox Company starts with similar GPM trends as Procter & Gamble with an increase in 2010 by 1.58% and a decrease in 2011 by 0.86%. This trend is also due to the decrease in Cost of Goods Sold in 2010. The Clorox OPM also follows the same trend as Procter & Gamble’s, but with a larger decrease in 2011, which is due to a large increase in Other Operating Expenses. The OPM in 2010 increased by 1.16% and in 2011 decrease by 5.91%. The Clorox NPM did not result in a stable trend with an increase of 1.11% in 2010 and a decrease of 0.87% in 2011. In 2011, Clorox had a large gain in Extraordinary Items, which is...
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